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Chapter - 19 Managing The Distribution Function

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Aditya Minhas
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14 views

Chapter - 19 Managing The Distribution Function

Uploaded by

Aditya Minhas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Learning Objectives:

1.Describe the role of the intermediaries


2.Assess the factors influencing distribution decisions
3.Evaluate the channel alternatives
4.Summarise channel management
5.Plan a market driven distribution system
6.Explain logistic management
Role of the Intermediaries

•Information - Provide information about the market to the


manufacturer
•Price Stability – Maintain price stability in the market
•Promotion – Promoting the product/s in their territory
•Financing – Finance manufacturers’ operations by providing the
necessary working capital, in the form of advance payments for
goods and services
•Title – Take the title to the goods, services, and trade in their own
name. This helps in diffusing the risks between the manufacturer
and the middleman.
New Role of Intermediaries

Brand Building
•Play a significant role in enhancing the value of the brand
•They participate in awareness creation and incentivizing
the customer
Marketing flows in Marketing Channels for a Typical
Consumer Product Company
Type and Nature of Middlemen

•Merchant Middlemen – take title to the goods and services and resell them
•Agents – intermediaries who do not take title to the goods and services, but
help in identifying potential customers and even in negotiations. Do not share
risk with the manufacturers
•Facilitators - Independent business units that facilitate the flow of goods and
services from the producer to the customer without taking a title to them or
negotiating for them on behalf of the producer
Channel Levels
•Represent channel members who have a specific role to play
•From as low as zero, or in other words, directly from the manufacturer to the
customer, one can have as high as 4 to 5 levels involved in distribution
Factors Influencing Distribution
Decisions

Determining Length of Distribution Channel


•Size of the Market
•Order Lot Size
•Service Requirements
•Product Variety
Factors Influencing Distribution
Decisions
•Market Characteristics
•Company Characteristics
•Product Characteristics – product value, perceived risk, and the
nature of the product
•Middleman Characteristics
•Intensity of Competition
•Environmental Characteristics
•Impact of Internet on Distribution – Disintermediation and re-aggregation are
therefore important consequences of Internet
Identifying Major Distribution
Alternatives
Intensive Distribution – involves all the possible outlets
that can be used to distribute
Selective Distribution
Exclusive Distribution
Terms and Responsibilities of
Intermediaries
•Price Policy – Price at which middlemen will get the
product from the manufacturers and the discount schedule.
It also mentions the price at which middlemen may sell the
product.
•Payment Terms
•Returns Policy
•Territorial Rights
•Mutual Services and Responsibilities
Evaluation of Channel Alternatives

Marketing Channels Across Product Life Cycle


Vertical Marketing System - achieves economies of scale
though their size, bargaining power and elimination of
duplicates services

-Manufacturer , wholesalers, and retailers are locked in an


unproductive conflict.
-In this system, all the three act as parts of a unified system,
like one of them owning the other, franchising the others or
have the power to make, them all cooperate
Types of Vertical Marketing Systems

•Corporate Vertical Marketing Systems (VMS)


- Successive stages from production to distribution are under
single ownership of any of the channel members. Vertical
integration is achieved through forward or backward integration
•Administered VMS
- seeks to control successive stages from production to
distribution not through ownership, but through the size and
power one of the channel members
•Contractual VMS
- consists of independent firms at different levels of production
and distribution, integrating their programes on a contractual
basis, to obtain larger economies of scale and, or sales impact
which they might not achieve alone.
Horizontal Marketing System
- reflects the readiness or willingness of two or more non
related companies to put together resources, to exploit an
emerging market opportunity.

Multichannel Marketing System


Channel Management
To effectively manage channel members, the marketer has to
a)Manage channel conflict
b)Motivate channel members

Channel Conflict
Manage channel conflict the marketer must understand
a.The type
b.The nature or cause
c.Magnitude of the conflict
Types of Conflict
There are three types of conflict
i.Vertical level conflict
ii.Horizontal level conflict
iii.Multichannel level conflict

Nature or Causes of Conflict


Largely due to financial and non-financial reasons
•Goal Incompatibility
•Role Ambiguity
•Difference in Perception of the Market
Magnitude of the Conflict - Refers to the seriousness of conflicts

Managing the Conflict


•Communication
•Dealer Councils
•Superordinate Goals
•Arbitration and Mediation

Motivating Channel Members


Motivation of channel members is often achieved through financial and non-
financial rewards.

Today, the task of motivating channel members is complex and demands an


innovative approach to making channel members partner in corporate growth
Planning a Market Driven Distribution
System
Steps Involved in Designing Market Driven Distribution
Eight steps in designing the market driven distribution :
1.Know What Customers Want
2.Decide on the Outlet
3.Determine the Costs
4.Bind the `Ideal’
5.Compare the Alternatives
6.Review Assumptions in the Light of Research
7.Confront the Gap between the `Ideal’ and the Actual Distribution System
8.Implement Changes in the System, if Required
Logistic Management
An effective supply chain management calls for better materials planning,
inventory management, management of transportation and warehouses, as also
information management

Focus on the integrated chain has led to the emergence of the concept of supply
chain management and integrated logistics. Several leading firms today, focus
on managing their entire supply chain rather than on transportation and
warehousing decisions alone, which were the main focus on logistics decisions
earlier.
Logistics Decisions
Transportation Decisions
Decision maker should also consider the following in selecting a
transportation mode:
a)Costs
b)Dependability of the mode
c)Transit loss and damage
d)Reach of the mode
e)Speed at which a firm is able to reach the market
Warehousing

Whether a firm uses its own or a third party warehouse, it has to take
following decisions:
a)Number of warehouses and their location
b)Level of customer service required to be provided to gain a competitive edge
c)Cost of distribution
d)Technology to be deployed – automated warehousing is now the order of the
day
Inventory Management

Inventory levels impact the competitive advantage of a firm

Third Party Logistics – an Emerging Alternative

Third party logistics providers can be segmented into three broad categories:
a.Diversified, or those who handle all product types
b.Product specific
c.Customised to a client

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